NationalThe Patented Medicine Prices Review Board (PMPRB) is in the process
of revising its overall approach to setting price ceilings, including
consideration of the use of U.S. Department of Veterans Affairs (DVA)
prices as part of the basis on which those ceilings are established.

The use of international price comparisons and the establishment of
price ceilings on patented medicines are counterproductive to initiatives
to provide high quality health care, and thus improve the health of
patients, or to help contain health care spending. The following are
among the principal concerns regarding such practices.

Using international comparisons ignores valid reasons for price
differentials across countries. The prices of pharmaceutical products,
as well as all other types of goods and services, differ widely across
countries, for many legitimate reasons. These include living standards,
income levels, consumer preferences, disease and drug consumption
patterns, product volume, exchange rates, regulatory requirements,
as well as the degree of competition in the health services and pharmaceutical
markets. Superimposed on these factors are government-mandated reimbursement
and price controls, which affect prices throughout the distribution
chain. As a result, establishing price ceilings by using prices from
other countries ignores prevailing market conditions and impedes biomedical
innovation by prohibiting each innovator from establishing prices
for its medicines based on market factors.

There is little evidence that international price benchmarking
leading to price controls actually curbs overall pharmaceutical spending.
Government-set prices preclude the benefits of price competition.
In these circumstances, such government interventions in the market
have little, if any, positive impact on the rate of growth in pharmaceutical
expenditures over the long term. Under market conditions, however,
price competition has proven to be an effective way to hold overall
spending down and to provide high quality health care.

International price benchmarking threatens patients' health by
dampening incentives to improve on today's treatments, thus lowering
health care quality. In order to fund critical long-term activities
to discover and develop potentially life-saving drugs, pharmaceutical
companies must be able to fairly and adequately recoup investment
in research and development. Price control practices that prevent
innovators from covering their costs will thus impede biomedical innovation
and can jeopardize high quality health care for future patients.

Within the broader context of concerns with the practice of comparing
prices for patented products across countries, the prices associated
with the DVA formulary are an inappropriate benchmark for PMPRB purposes,
for the following reasons:

The DVA is not equivalent to any of the regulatory authorities in
the other six countries whose prices are considered by PMPRB.

DVA prices are not an accurate reflection of the free market.

The DVA formulary is extremely restrictive.

DVA prices reflect only a small component of the market.

In deciding how best to allocate health care resources and resolve
the tension between controlling health care spending, improving the
health of the population, and ensuring that the research-based pharmaceutical
industry can continue to deliver cost-effective innovations for patients,
the PMPRB's proposed approach has the potential to negatively impact
the latter.

ProvincialAdditional concerns have been raised regarding ongoing efforts at
the provincial level, particularly in Ontario and British Columbia,
to impose ceilings on pharmaceutical expenditures without a full evaluation
of the positive contribution of the research-based pharmaceutical industry
to an overall reduction in health care costs. These cost containment
measures threaten the economic viability of introducing innovative products
in provincial markets, a situation further aggravated by restrictive
formulary listing practices.

Potential Exports/Foreign Sales

It is not possible at this time to determine the impact on sales for
PhRMA member company affiliates in Canada if the aforementioned issues
were to be resolved.